A Crypto Revolt Against a Crypto Bill
Legislation to establish a regulatory framework for digital tokens has been thrown into turmoil — by one of its biggest champions.
Crypto setback
Bitcoin investors are accustomed to market volatility. But what about regulatory uncertainty?
In a surprise move, Senator Tim Scott, Republican of South Carolina and chair of the Senate Banking Committee, postponed a vote scheduled for Thursday on a draft bill that would establish a regulatory framework for cryptocurrencies.
Among the opponents of the bill: Coinbase, the big and politically influential crypto exchange. “After reviewing the Senate Banking draft text over the last 48hrs, Coinbase unfortunately can’t support the bill as written,” Brian Armstrong, the company’s C.E.O., wrote on X, drawing both support and criticism.
A recap: The legislation, known as the Clarity Act, would determine regulatory authority over crypto between the S.E.C. to the less-aggressive Commodity Futures Trading Commission. Crypto executives, who have become major political donors, have pushed for significantly lighter oversight.
The measure once had bipartisan support. But Senate Democrats have pushed for ethics rules limiting U.S. officials from “issuing, endorsing or profiting” from crypto — an attempt to restrict the Trump family’s growing financial ties to the industry.
Then Armstrong raised his objections. The Coinbase C.E.O. argues that the current version would:
- erode the C.F.T.C.’s authority, “making it subservient to the SEC”
- give the government “unlimited access” to investors’ financial records
- “draft amendments that would kill rewards on stablecoins”
The future of stablecoins, a fast-growing segment of digital finance, has become a major sticking point. Issuers of those tokens, including Circle, want a legal framework that will let them pay interest on those assets, as banks do with many deposit accounts, to attract more customers.
That would also be a big deal for Coinbase, which offers some customers who hold Circle’s USDC token the chance to earn 3.5 percent in “rewards.”
Banks have stepped up their lobbying efforts in recent days as well. They’ve pushed back on blessing stablecoin rewards programs, which Armstrong suggested was an effort by traditional lenders to “ban their competition.”
What’s next? Bitcoin was trading around $96,800 this morning, but it has declined from the two-month high it reached on Wednesday.
It’s unclear what the next steps are for the Clarity Act. But Senator Cynthia Lummis, Republican of Wyoming and an avowedly pro-crypto member of the banking committee, bemoaned the bill’s forestalling in a statement. She added that the recent “response from some in the industry proves they just are not ready” for legislation to help the sector.